Elon Musk announced at Tesla’s annual shareholder meeting yesterday that in order to secure adequate supplies of batteries for future expansion of Tesla’s electric vehicles, Tesla would consider entering the mining business.
Musk discussed plans for their electric pickup trucks and his ambition for production of their Class 8 truck to commence by the end of 2020. Both of these larger vehicles obviously require larger lithium-ion batteries to power them. It seems Musk may be concerned about potential squeezes in the availability of critical battery metals down his emission free road.
He said to shareholders: ““There’s not much point in adding product complexity if we don’t have enough batteries. That is complexity, but without gain.”
Musk seems to be taking a strategic look at every part of the supply chain for Tesla. “We might get into the mining business. I don’t know, maybe a little bit at least. We’ll do whatever we have to to ensure that we can scale at the fastest rate possible.”
Tesla watchers may have picked up on a bit of a trend here. Only last month Tesla’s global supply manager for their battery metals, Sarah Maryssael, told a private meeting in Washington that Tesla is forecasting a global shortage of minerals critical to the production of electric vehicles.
Cause for concern
For a company that is 100% focussed on the electric vehicle market, Musk is right to be concerned about ensuring his business can source adequate supplies of battery metals and other raw materials for manufacture. Recent analysis from Roskill shows demand for lithium ion batteries increased at greater than 20% a year, meaning a ten-fold increase by 2027.
There are already substantial waiting lists for electric cars, ranging from a few months to over a year. There is no shortage of demand, the issue is manufacturing the cars fast enough, and one of the bottlenecks in their manufacture continues to be battery production.
With Bloomberg and Deloitte now estimating electric cars becoming cost competitive with internal combustion engine (ICE) powered cars in the next 2-3 years, this demand is only going to ramp up.
If you’re sitting on top of a lump of spodumene right now, it might be a good time to send Elon an email.
